An Empirical Model of Stock Analysts' Recommendations: Market Fundamentals, Conflicts of Interest, and Peer Effects

In this paper we develop an empirical model of equity analyst recommendations for firms in the NASDAQ 100 during 1998-2003. In the model we allow recommendations to depend on publicly observed information, measures of an analyst's beliefs about a stock's future earnings, investment banking activity, and peer group effects which determine industry norms. To address the reflection problem, we propose a new approach to identification and estimation of models with peer effects suggested by recent work on estimating games. Our empirical results suggest that recommendations depend most heavily on publicly observable information about the stocks and on industry norms. In most of our specifications, the existence of an investment banking deal does not have a statistically significant relationship with analysts' stock recommendations.

Decentralization Estimators for Instrumental Variable Quantile Regression Models

The instrumental variable quantile regression (IVQR) model (Chernozhukov and Hansen, 2005) is a popular tool for estimating causal quantile effects with endogenous covariates. However, estimation is complicated by the non-smoothness and non-convexity of the IVQR GMM objective function. This paper shows that the IVQR estimation problem can be decomposed into a set of conventional quantile regression sub-problems which are convex and can be solved efficiently. This reformulation leads to new identification results and to fast, easy to implement, and tuning-free estimators that do not require the availability of high-level "black box" optimization routines

The diffuse Nitsche method: Dirichlet constraints on phase-field boundaries

We explore diffuse formulations of Nitsche's method for consistently imposing Dirichlet boundary conditions on phase-field approximations of sharp domains. Leveraging the properties of the phase-field gradient, we derive the variational formulation of the diffuse Nitsche method by transferring all integrals associated with the Dirichlet boundary from a geometrically sharp surface format in the standard Nitsche method to a geometrically diffuse volumetric format. We also derive conditions for the stability of the discrete system and formulate a diffuse local eigenvalue problem, from which the stabilization parameter can be estimated automatically in each element. We advertise metastable phase-field solutions of the Allen-Cahn problem for transferring complex imaging data into diffuse geometric models. In particular, we discuss the use of mixed meshes, that is, an adaptively refined mesh for the phase-field in the diffuse boundary region and a uniform mesh for the representation of the physics-based solution fields. We illustrate accuracy and convergence properties of the diffuse Nitsche method and demonstrate its advantages over diffuse penalty-type methods. In the context of imaging based analysis, we show that the diffuse Nitsche method achieves the same accuracy as the standard Nitsche method with sharp surfaces, if the inherent length scales, i.e., the interface width of the phase-field, the voxel spacing and the mesh size, are properly related. We demonstrate the flexibility of the new method by analyzing stresses in a human vertebral body